After you have done that, run dosbox and input:
mount d e:\ -t cdrom
This will correctly mount your CD drive as D: (... your CD drive is E: under windows I presume?) and you will be able to install the game from D: to C:

BTW, as you probably know by now the CD drive spins a lot and you'll get some hickups ingame due to the spinup/spindown times, that's because the game was meant to run on older and slower hardware, the old CD drives were spinning around without stopping.
Easiest way to avoid this:
Create a valid ISO image from the CD and use the excellent imgmount command in dosbox to mount it as CD drive D: , then you won't need your costly CD anymore, and will avoid scratches and so on ....
No need to reinstall the game and you won't lose the saved games.
An good program top create a valid and dosbox compatible image is:
http://www.imgburn.com/

For the others who can't figure it out how to reconfigure the game settings:
If you followed the dosbox howto correctly, run dosbox and to configure the game input: